SPONSORED SUPPLEMENT: E-Payments: Curing the Achilles Heel of the Web

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Kerlin notes that acceptance of the cash alternative has been strong among AmeriNet’s client base, especially sites that support Xbox and PlayStation gaming devices. AmeriNet is processing up to 400 such transactions per week, he reports. “Internet gaming is a potentially huge growth spot,” he says.

Getting more settled

AmeriNet’s primary business is in processing debit payments and e-checks. Kerlin says the company is experiencing strong growth in those areas as well. Especially as retailers get their online operations down pat, they are more willing to look at payment alternatives such as e-checks, he says. “There has been hesitancy by some processors who sell our services to take new things to their larger accounts until they were through a break-in period,” he says.

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He adds that AmeriNet’s e-check business has doubled in the past year. “Web merchants are getting a little more settled down,” he says. “They now have the technology and funding issues under control and they can focus on other things like incremental sales. They’ve always understood the concept of e-checks, but they had 10,000 other things to do.” As a result of the industry’s growing maturity, he adds, “We’re seeing a nice build there.”

A cheaper alternative

InterCept is experiencing a similar phenomenon with its electronic check product. “It’s a secure, guaranteed payment,” Perry says. “Retailers would rather take an electronic check because it’s cheaper than a credit card.” That’s especially true among the large group of InterCept customers who sell information on the web, such as news stories or specialized commentary. “Even though the content sites would like to sell subscriptions, consumers often would like to buy content by the drink,” he says. “But if you’re charging 80 cents for, say, a news story, it’s too expensive to accept credit cards.” After stumbles by some initial providers of small payments, the market is coming back, he says. “Their idea was dead-on, but those who were in it before came at the market obliquely,” he says. “If they had approached it not from a security point of view but from a payments point of view, they might have had more success.”

That said, the number of credit card transactions still far out-distances the number of e-check transactions. Part of the problem with e-checks is still that the authentication process is not as smooth or well-established as it is for credit card payments. “A major issue is authenticating the person presenting the information,” Rue says. “With credit cards you know the name of the person tied to the card number. That’s not true with checking accounts. Guaranteeing a transaction like that is fairly expensive.”

Getting over the extra step

That split becomes even wider when retailers look at password-based protection programs that MasterCard and Visa are rolling out. Verified by Visa and MasterCard’s SecureCode require cardholders to register their cards with their issuers and choose a password. Then when they make a purchase at a participating merchant’s web site, they enter their password as part of the checkout process. That guarantees the transaction and relieves merchants of any liability. While some critics have pointed out that it adds a step to a process that online retailers have been streamlining, First National says it has heard few complaints from retailers. “Customers expect the extra step,” notes Dillon Allie, associate marketing manager for First National. “Customers have gone to their issuers’ site to sign up, so when they go to a retail site, they expect the extra step to check out.”

The quest for payment security is a running battle between retailers and their payment processors on the one hand and criminals on the other hand. One of the latest scams involves criminals using stolen card numbers to make small donations at not-for-profits’ web sites to make sure a card number is still active and valid, Allie says. “They lay the foundation for using the card with very small amounts at not-for-profit sites, then use the card number for bigger purchases at other retail sites,” he says. Adds his colleague Rue: “The bad guys are always one step ahead. It’s a challenge to stay even with them.”

As more e-retailers charge sales tax,
they’re looking for streamlined ways to collect and file

One payments issue that more retailers are agreeing about is sales tax. As online retailing becomes more mainstream and as local and state governments hurt for money, opposition to online sales tax seems to be fading. “We’re getting more companies that have come to the conclusion that they are going to have charge sales tax, whether they like it or not,” says Mike Blandina, architect for sales and use tax at CCH Inc., provider of tax information and software for tax processing. “A lot of people have seen through the scare tactics that this was going to cost millions and be really hard to implement.”

Once Wal-Mart Stores Inc. and Target Corp. announced a year ago that they would start collecting online sales tax, the battle was virtually over, analysts say. Now the question becomes: How? Or more accurately, two questions become: How?

Dealing with sales tax is a two-step process, both of which offer challenges to the online retailer. The first is simply knowing how much to collect and when. For that, CCH offers its ZIPsales CertiCalc tax calculation product that keeps track of the rates and policies of all nearly 7,000 taxing jurisdictions. The second is filing returns with those jurisdictions. For that, CCH offers its ZIPsales Returns product.

At the end of last year, CCH introduced an integration package that ties CertiCalc directly into ZIPsales Returns. G.A. Wright, a marketing company and seller of collateral marketing material to franchisees, started a beta test of the integrated offerings in December. The test went smoothly enough that CCH is rolling it out now to retailers and other customers, Blandina says.